ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) policy board has approved proposed amendments to the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980.
Initially introduced in the National Assembly through the Modaraba Ordinance (Amendments) Bill 2020 in July 2020, the amendments secured approval from the Standing Committee on Finance and Revenue. However, they lapsed following the dissolution of the assembly in August 2023.
To revive the reforms, the SECP conducted a comprehensive review, actively consulting stakeholders. The revised proposal has now been approved by the policy board and will be submitted to the Finance Division for further legislative processing. The amendments aim to promote industry growth, empower investors, and align regulations within the modaraba sector.
Key features of the proposal include the introduction of unlisted modarabas to facilitate financial resource mobilisation and implement performance-based profit-sharing mechanisms. Investor rights will be strengthened by aligning governance provisions with the Companies Act, allowing special resolutions for management changes, and ensuring better protection through legal access for winding-up proceedings.
Additional reforms focus on refining regulatory oversight by granting the SECP authority in disciplinary matters, converting certain criminal offences into civil violations for improved enforcement, and dissolving the Modaraba Tribunal, transferring its functions to high and session courts.
These amendments aim to modernise the sector, enhance transparency, and simplify business operations. Once enacted, they are expected to significantly contribute to the advancement of the legal framework governing Islamic financial institutions.
